Europe’s core values are prosperity, equity, freedom, peace, and democracy in a sustainable environment. The EU exists to ensure that Europeans can always benefit from these fundamental rights. If Europe is no longer able to guarantee them, it will have lost its reason for being. The only way to address this challenge is to grow and become more productive, while preserving our values of equity and social inclusion. The only way to become more productive is for Europe to undergo radical change. These are the words of Mario Draghi in the introduction to his report, emphasizing that productivity is an existential challenge for the EU.
If the political and institutional conditions are met, the EU should continue issuing common debt instruments based on the NextGenerationEU model, which would be used to finance joint investment projects aimed at increasing European competitiveness and security.
“The financial needs required by the EU to achieve its goals are enormous,” as stated in Draghi’s report. “At least 750-800 billion euros of additional annual investments are needed to achieve the objectives outlined, according to the latest Commission estimates, equivalent to 4.4-4.7% of the EU’s GDP in 2023.” To put it in perspective, the Marshall Plan investments during the 1948-51 period equaled 1-2% of the EU’s GDP.
“We have said many times that growth has been slowing down in the EU for a long time, but we ignored it. Just two years ago, we would never have had a conversation like this because things were generally going well. But now we can no longer ignore it: the conditions have changed.” Urgency and concreteness are two key words in the report, with approximately 170 proposals presented.
Mario Draghi emphasizes the importance of innovation as a third pillar for a turnaround in productivity. He stresses that competitiveness should focus on innovation and resilience, advocating an end to state aid exemptions that should be used for joint projects. The recommendations put forward in the report are actionable immediately.
Direct Insights
“So far, efforts to deepen European integration among member states have been hindered by unanimous voting. Therefore, all possibilities offered by the EU Treaties should be used to extend qualified majority voting,” Mario Draghi’s report on competitiveness reads. The report recommends expanding qualified majority voting to more areas and, in cases of deadlock, resorting to enhanced cooperation.
The report suggests increasing EU funding for Research and Development (R&D) in defense and focusing on joint initiatives. This approach could be developed through new dual-use programs and a proposal for European defense projects of common interest to organize necessary industrial cooperation for maintaining leadership in today’s most advanced technologies.
Issuing common assets systematically would require stronger budget rules to ensure that an increase in common debt is accompanied by a sustainable national debt path, as highlighted in Draghi’s report. “Issuing common safe assets to finance joint investment projects could follow existing models but should be accompanied by all guarantees that such a fundamental step would entail,” warns the former prime minister.
“We need to adopt a new approach to cooperation: removing obstacles, harmonizing rules and laws, and coordinating policies. There are different constellations in which we can move forward. But what we cannot do is not move forward at all. Our confidence that we will move forward must be strong. Never before has the scale of our countries seemed so small and inadequate in the face of challenges.” These are the insightful words of Mario Draghi in his report introduction.
To reduce its vulnerabilities, the EU must develop a true ‘foreign economic policy’ based on the security of critical resources. In the short term, the EU must swiftly implement legislation on critical raw materials and integrate it with a comprehensive strategy covering all stages of the critical mineral supply chain. Establishing a dedicated European platform for critical raw materials is proposed to strengthen Europe’s position in the procurement phase.
The EU budget should be reformed to increase effectiveness and efficiency, along with better support for private investments by establishing a ‘competitiveness pillar’. The EU’s financial resources should be refocused on strategic projects and collectively agreed objectives where the EU brings the most added value. The EU should simplify the budget structure to support strategic projects and reduce the number of funding programs, enhancing flexibility for reallocation and supporting private investments.
Sources PPE, ‘Mario Draghi has brought out the bazooka’
“Mario Draghi has brought out the bazooka,” commented sources from the PPE, referring to the inclusion of a chapter on common debt in the report on competitiveness authored by the former ECB president.
“First, there’s the definition of priorities and common projects, then there are two possible paths: national funding or new own resources. It will be up to the member states to decide how they want to act,” stated the President of the EU Commission, Ursula von der Leyen, in a press conference with Mario Draghi.
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